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WAGES, 
THE MOTHER OF PROFIT 



AN EXPOSITION OF THE STATUS OF WAGES 
IN POLITICAL ECONOMY. 



BY E. H. PUTNAM. 



"The Stone Which the Builders Rejected is Become 
THE Head of the Corner." 



Published by the Author at Moline, Illinois. 

COPYRrGHT, 1900. 



All Rights Reserved, 






61466 

PREFACE. 



If, as I believe, the principles taught in the following pages are 
true, it would be worth the writing of a hundred large volumes in order 
to their exhaustive exposition. Circumstances, however, compel me to 
the utmost conciseness compatible with lucidity. He who cannot do all 
that he would is not thereby excused from doing what he can. I trust 
that my humble rush-light will prove sufficient illumination for the 
keener-eyed, and that they in turn will help to shed upon this subject 
an effulgence that will reveal its central truth to the understanding of 
the world. I do not address myself to the careless, and I believe that 
he who "hears the truth willingly" will find it here, and in such guise 
as will make him glad. 

It has been frequently said that the interests of labor and capital 
are identical ; but this seems to have been an axiom of extremely vague 
meaning hitherto. In this treatise this truth is demonstrated, not only, 
but why and how it is true is also shown, as also, how to apply it 
practically in the industrial system, so that the world may have and enjoy 
at all times all that its united energies can produce. 

E. H. PUTNAM. 



TWO COPIES RECEIVED, SECOND COPY, 
L ibrary of Congret% 
Ufflee of tii« 

MAY 1 1 1900 

Kejlster of Cop^frfghtSt 

■ INTRODUCTORY NOTE. 




This booklet points toward the east whence must come the dawn of a 
better social day. Its author has been in various capacities intimately related 
to our industrial life for more than twenty-live years. As superintendent in 
several of the large manufactories of the land he has stood midway between 
capitalist and laborer, and has studied the problem from both sides. His 
words in the essay which follows are a mature and independent statement of 
conclusions which he has reached, as, for a quarter of a century, he has con- 
fronted the growing problem of capital and labor and has endeavored to think 
it through to a practical solution. 

"Whatever differences of opinion may arise among intelligent readers as to 
incidental details of the argument herein advanced, its central contention is, 
we are confident, unassailable and of paramount importance. 

Men and women who appreciate the gravity of the industrial problem 
which we are today facing are eager to listen to anyone who proposes a remedy 
for existing evils which is at once based upon sound economic science and 
capable of being practically applied. To such and to all interested in human 
welfare this booklet comes with the proposition which it is its purpose to 
defend, that a high wage is the royal road to high profit and universal pros- 
perity, that the interests of capital and labor are mutual, that the ethical and 
the economical in industrial relations are coincident. In defence of his 
proposition the author makes effective use of the economic value of the dis- 
tinction between fixed and variable prices. 

The argument is a convincing demonstration of our industrial solidarity 
and of the scientific accuracy of the statement, economically applied, that 
"none of us liveth unto himself." The mission of the essay will be accom- 
plished if it shall help to create and to convert into better industrial conditions 
an intelligent conviction of the fact, not only that a social system whereby 
millions of our fellow men are crushed to earth is iniquitous, but that it is the 
height of economic folly and that permanent prosperity for all can come only 
as the divine and inseparable correlative of a social order which shall recognize 
both the economic and moral value of the truth that "the laborer is worthy 
of his hire." 

W. W. WiLLARD. 



Wages, the Mother of Proiii 



John Stuart Mill, in his "Principles 
of Political Economy," People's Edi- 
tion, London, 1885, p. 279, says : 
" There is no mode in which capital- 
ists can compensate themselves for a 
high cost of labor, through any action 
on values or prices. It cannot be pre- 
vented from taking its effect in low 
profits. If the laborers really get 
more, that is, get the produce of more 
labor, a smaller percentage must re- 
main for profit. From this law of 
distribution, resting as it does on a 
law of arithmetic, there is no escape. 
The mechanism of exchange and prices 
may hide it from us, but is quite 
powerless to alter it." 

The above opinion is based upon the 
assumption that with a general in- 
crease of wages there would be no in- 
crease of production, and that all 
prices are readily responsive to the 
laws of supply and demand. Of course, 
if there is a fixed quantity of current 
product to be divided between the 
employers and the laborers, any in- 
crease to the one, means a diminution 
to the other. But, is the theory 
founded on an adequate conception of 
industrial affairs under the changed 
conditions that have developed since 
Mill's time, or of the economic quali- 
ties of different classes of prices, even 
at the time that he wrote? I think 
not. 

If all prices were alike responsive to 
the laws of supply and demand, a lower- 
ing of the general rate of wages and of 
profit would make no difference in the 
■value of the general income. But all 
prices are not alike in this respect; and, 



to an examination of this fact, and of 
its bearing upon industrial economy, 
the reader's kindly assistance is 
solicited. 



TWO KINDS OF PRICES. 

The prices paid by the people are of 
two very different classes, and may be 
characterized as fixed, and variable 
prices. This fact must be recognized, 
and must never for a moment be lost 
sight of by him who would fathom 
the mystery of the alternations of pros- 
perity and adversity that have marked 
the course of industrial affairs during 
the last half-century ; and to a want 
of an adequate conception of this 
difference, and of its bearing upon the 
questions involved may be ascribed 
the utter failure of society to master 
the problem of distribution ; for, in 
our ignorance of the law of distribu- 
tion lies our weakness. 

By variable prices of course is meant 
the prices of the general products of 
industry. It may be needful to state 
right here that this should not in- 
clude the price of labor. Labor is not 
a product, but on. the contrary it is a 
producer. True, it is the universal 
practice to treat it as a commodity, 
dependent as to its price, upon the 
laws of supply and demand. But we 
shall find before we get to the end of 
our quest that we have made a very 
grievous mistake in so doing. 

Briefly, the variable prices that we 
have to deal with here are the prices 
of commodities, which respond readily 
to the laws of supply and demand ; 



Wages, the Mother of Profit. 



while the fixed prices are such as do 
not promptly yield to these laws. 

The great hulk of the variahle prices 
are those paid for food and clothing, 
and for the maciiinery of production 
and distrihution. That of the fixed 
prices may be stated as taxes, and 
usury, or, interest upon debt. It is 
not important to our present purpose 
that the proportion that these prices 
bear to each other be ascertained ; but 
it is very important that we recognize 
the fact that the fixed prices consume 
a very considerable fraction of the 
people's income. The writer is not 
disposed either to fatigue the reader, 
or to discredit his intelligence by a 
labored argument to sustain this posi- 
tion ; a cursory glance will suflfice. 
Consider the immense sums paid every 
year in taxes ; national, state, county 
and municipal; also, the hundreds of 
millions paid in interest by corpora- 
tions and individuals, and we shall 
have a sufficient conception of the 
ratio between the two classes of prices. 

Strictly speaking, the prices that I 
have designated as being fixed, are 
not absolutely so, when considered in 
relation to long periods of time ; but 
all will concede that their approach to 
fixity is extreme when compared with 
the oft-fluctuating prices of commodi- 
ties in general. 

Another feature of difference be- 
tween the two classes of prices may 
profitably be considered here. It is 
well known that when adversity falls 
upon the industries of a country, the 
people find it more and more difficult 
"N to borrow money, and that the general 
interest charge rises as the pressure of 
hard times increases. Also, during 
periods of extreme business depression, 
the burden of taxation is greatly 
augmented by the increased crimi- 
nality and pauperism ; all of which 
must be paid in one form or other by 
those who have wherewith to pay. It 
appears therefore that the amount of ■ 
the fixed prices, so-called, increases at 



times when the variable prices are 
rapidly declining. 

There are other prices, namely, such 
as are established by custom rather 
than by competition that may be 
classed with the fixed prices. 

Another point of marked difference 
remains to be noticed, namely; inter- 
est and taxes are prices that take pre- 
cedence to all others in their effective 
demand for payment. The bond is in 
the creditor's possession, and it is 
therefore impossible for the debtor to 
divert any part of the interest due to 
the payment of any other price. As 
to taxes, if the owner of the property 
fail to pay voluntarily, he will be com- 
pelled to pay, as the sheriff will sell 
his property if necessary thereto. In 
short, whenever the nominal income 
of an individual, or of all the people 
whose incomes are derived from the 
variable prices is reduced, the full 
amount of the reduction is of necessity 
taken from that portion of income 
which had formerly gone to the pay- 
ment of the variable prices; i. e., to 
the purchase of commodities. This 
being true, a general reduction in the 
rate of wages cannot possibly be com- 
pensated for by a reduction in price 
of commodities. 



OF THE EFFECT OF A GENERAL 

REDUCTION IN THE RATE 

OF WAGES. 

In order to an intelligent inves- 
tigation of the effect of a general rise 
or fall of the wage rate, it is necessary 
that we agree upon some proportion 
of a given wage that must go to the 
payment of the fixed prices, name it 
in terms of money, and ever after keep 
to these invariable terms for the fixed 
prices, devoting the remainder as the 
total available for the variable prices. 
It would be extremely diflBcult to as- 
certain just what this proportion really 
is ; and the reader will perceive as we 
proceed that it is not at all necessary 
to our purpose. 



6 



Wages, the Mother of Profit. 



Now, let us assume, for the purpose 
of illustration, that all labor is fully 
employed, which would indicate, of 
course, the very height of industrial 
prosperity. And suppose that tlie 
average- 
Wages per capita is, per diem.,- $2.00 
Profit per capita, per diem .50 

Price of the days product 2.50 

Now, in order to ascertain tlie effect 
upon the workmen and the employer 
of a general reduction of wages, we 
have simply to find how long it will 
take the workman to earn enough 
money to buy the whole day's product 
witli that portion of his wages that is 
available for the payment of the 
variable prices before, and also after 
the reduction ; and the same rule must 
be employed relative to the employer's 
profit. 

Assuming that the fixed prices con- 
sume 25 per cent, of the day's income, 
this, expressed in money, is 62i cents ; 
of which 50 cents is drawn from the 
wages, and 12i cents from the profit. 
This being the case, the workman has 
$1.50 per day that may be applied to 
the purchase of the days' product (or 
its equivalent in other mens' products). 
$2.50 --$1.50 equals 1|. That is to say, 
the workman can purcliase tlie day's 
product in ]f day's time. The amount 
of the profit available for this purpose, 
after deducting the 12i cents for the 
fixed prices is 37i cents; and $2.50-^ 
$0.37i equals 6|. That is to say, the 
profit available will purchase the day's 
product in 6| days' time. 
Tabvilating the foregoing, we have: 

Wages per day, per man $2 00 

Profit per day, per man .50 

Price of day's product $2.50 

Amount of wages consumed by 

fixed prices .50 

Amount available for variable 

prices $1.50 

Amount of profit consumed by 

fixed prices .125 

Amount available for variable 

prices .375 

Total ----- - $2.50 



Time required for workman 
to purchase the days' pro- 
duct, days 1.66 plus 

Time required for profit, per 
cap., available for the pur- 
pose to purchase the days' 

product, days 6.66 plus 

Now, there are various circum- 
stances that induce the employer to 
cut wages. Sometimes the conditions 
are such that he lias no other recourse 
by which he can realize a profit for 
himself : again, wages are some- 
times reduced in order to increase 
profits. That this course affords at 
least temporary advantage to the in- 
dividual employer can not be doubted ; 
and it is generally claimed that 
tliough profits, and, therefore prices, 
follow wages downward when this 
movement becomes general, yet, when 
the lower level has been reached, the 
purchasing power of wages will be 
equal to what it was before the reduc- 
tion. And yet, somehow, the business 
of the country at such time remains 
depressed I Possibly we overlook the 
fact that the fixed prices have not 
fallen at all. The laws of supply and 
demand liave little effect upon these 
prices ; in fact, as was pointed out 
above, added to the burden of the 
fixed prices at such a time is the cost 
of greatly increased criminality and 
pauperism. 

Now, suppose a general reduction of 
wages to tlie extent of, say, 25 per 
cent. ; this would give : 

Wages per day, per man $1.50 

Profit 1.00 

Price of product $2.50 

According to this it would appear 
that the employer had been greatly 
benefitted by the change, as his profits 
are exactly doubled. But, wliy did 
not the employers increase profits by 
raising prices instead of by cutting 
wages ? The answer is ; because com- 
petition rendered this impossible. 
But will competition be less intense 
now, after having reduced the pur- 
chasing power of the great mass of the 



Wages, the Mother of Profit. 



population so largely? Indeed will 
not the sudden falling off of demand 
consequent upon the great reduction 
in wages cause a glut of the markets to 
such an extent as to intensify compe- 
tition beyond anything before known? 
Certainly. It is obvious then that 
the conditions for profit-making are 
worse now than before. 

Competition among employers to 
get rid of a constantly and rapidly 
accumulating surplus will proceed 
with the process of beating down 
prices ; for the battles betv/een work- 
men and employers are insignificant 
when compared with the unceasing 
war of competition among employers 
solely. 

But how much must prices fall be- 
fore the equilibrium will be restored ? 
Wages were reduced 25 per cent. Let 
us see what will be the effect of an 
equal reduction in the price of the 
product. Our last table gave : 

Wages per day $1.50 

Profit -- 1.00 

Price of product $2.50 

Reducing prices 25 per cent, we 
have : 

Wages per day $1.50 

Profit -I .375 

Price of the day's product 1.875 

If, now, it shall take no longer to 
earn money enough to buy the day's 
product, (after paying the fixed prices, 
which, as we know, take precedence), 
than it did before wages were reduced, 
we shall go on as prosperously as be- 
fore. We must bear in mind that the 
fixed prices have not changed ; they 
continue to consume fifty cents of 
each day's wages, and twelve and one- 
half cents of the daily profit per man. 
Deducting 50 cents from the day's 
wages, we have just $1.00 that may be 
applied to the purchase of commodi- 
ties ; and this into the price of the 
day's product goes 1.875 times. De- 
ducting the 12i cents payable to the 
fixed prices from the profits, 25 cents 
remain. This, into price of the day's 



product, 1i times. Comparing the 
present purchasing power with what 
it was before wages and profits were 
reduced, we find as follows : Before 
the reduction, the wages would pur- 
chase the days product in, 

days, 1.66 plus 

and the profit in 

days, 6.66 plus. 

Since the reduction, the wages avail- 
able will purchase the day's product in 

days, 1.875 ; 

the profit availablein 

days, 7.50. 

Thus it appears that, after reducing 
wages and prices, each by the same 
rate per cent., the purchasing power 
of the wages relative to the day's pro- 
duct has fallen 12i per cent., and that 
of profit, 12i per cent. 

Referring back to the situation at 
the outset ; all the labor of the land was 
fully employed, consumption equaling 
product. Now, all labor is fully em- 
ployed, but consumption is 12i per 
cent short. Thus, we find that neither 
the workman nor his employer can 
buy so much now as when wages, 
profits and prices were higher. 

Who then, is benefitted by this con- 
dition ? Evidently, the recipients of 
the fixed prices. Every man whose 
income consists of a fixed salary, or 
the major part of whose income is 
from interest-bearing bonds, can now 
purchase with his income greatly 
more of the products of industry than 
before. And if this class of people 
would, as a matter of fact, purchase 
the excess of product, the demand for 
goods would still equal the supply, 
and the workmen and employers would 
continue to produce to their utmost 
capacity, ignorant of the fact that 
their over-reaching greed had resulted 
in an enormous gratuity to the passive 
recipients of the fixed prices ! 

But, will these latter people buy the 
accumulating excess of product? It 
is generally supposed that salaried 
people and bond-holders have, even in 



Wages, the Mother of Profit. 



times when prices are fairly good, as 
much as they really need of flour, 
potatoes, pork, beans, coal oil, shoes, 
stockings, handkerchiefs, buttons, 
shoe polish, cups and saucers, coal, 
wood, hats, caps, telephone poles, cast 
iron, cabbages, etc. 

As a matter of fact, these people 
will simply get what they want much 
more cheaply than before, some of 
them purchasing rather more of 
luxuries, while many will simply save 
more, thus adding to the general stock 
of capital, which, seeking investment, 
will still further intensify competition, 
whose peculiar office is to beat down 
profits. 

Meantime, the excess of product in 
most lines of industry continues to 
accumulate, with the inevitable result 
tiiat employers make still greater re- 
ductions in price, many of them offer- 
ing their goods for less than cost ; be- 
sides, workmen are being discharged 
by the thousands all over the country ; 
and as wage workers seldom have 
much money ahead, the demand for 
goods is soon still further curtailed by 
the full amount of the wages that they 
had been getting, except in so far as 
general society gives them, to keep 
them from starving, or pays In the 
form of increased taxation to support 
many of them in poor-houses, cala- 
booses, jails and prisons, hospitals and 
insane asylums ! 

Everybody will concede the proposi- 
tion that as productive power in- 
creases the product must fall in price ; 
everybody will concede that capital is 
a product of labor ; therefore, every- 
body must concede that, the more of 
capital a given amount of labor is 
enabled to produce, the less will be its 
value. There is absolutely no escape 
from this; and, in the healthy, well- 
informed mind there is no desire to 
escape from it. The inevitable ten- 
dency in a progressive society is to 
diminish the per cent, of profit and 
the relative number of employers, 



while at the same time increasing the 
aggregate income of the latter and of 
the workmen also. 

Men are constantly endeavoring by 
every device of inventive genius to 
cheapen product by increasing pro- 
ductive power, and their efforts in this 
direction are wonderfully successful. 
But the no less strenuous endeavor to 
prevent the decline in value of that 
part of the product which is set aside 
to be used as capital must meet 
with inevitable defeat. If capital 
were a product of something else than 
labor then it might escape subjection 
to the same law that governs the price 
of shoestrings, or of any other com- 
modity, but since it is entirely a pro- 
duct of labor, its value must be 
measured over against the amount of 
labor that was required in order to 
produce it ; and as the price of shoe- 
strings falls, the price of capital will 
go the same way. The necessary cor- 
relative of this is that man must rise 
in value. 

Nothing is plainer than that if an 
individual employer shall reduce 
wages below what his competitors are 
paying, other things being equal, his 
profits will be increased, and the ad- 
vantage to liimself for the time being 
will be real ; for the diminution in the 
purchasing power of the men of a 
single factory will have no appreciable 
effect upon the markets of tlie world. 
But it is not tlie defenseless wage- 
worker that he has now to deal with, 
but his equal ; his competitor. And 
how long will the latter permit tliis 
advantage ? Large numbers of selfish 
employers are at all times seeking 
self-aggrandisement by this means, 
and, though no doubt many deplore 
the situation, and perhaps plainly see 
the final futility of such a course, in 
the unorganized condition of society 
they are compelled in self-defence to 
follow suit. And we have seen what 
calamity a general reduction to the 
extent of twent-flve per cent, will pro- 



Wages, the Mother of Profit. 



duce, though we have not rehearsed 
the details of bankruptcy, despair, and 
general demoralization that necessari- 
ly follow. • 

We have seen that after reducing 
wages and prices, each 25 per cent, 
the purchasing power of the wages and 
profit remaining after paying the 
fixed prices, falls 12i per cent, as com- 
pared with the product, and since the 
sole beneficiaries, viz.: the recipients 
of the fixed prices, will not buy this 
accumulating stock of fish, fowl, and 
the thousand varied products of gener- 
al industry, there can not possibly be 
any effective demand for it, and so, 
what now takes place, or rather what 
has been taking place for some time 
past, under the foregoing conditions. 
Is a very great curtailment of produc- 
tion, throwing thousands of men en- 
tirely out of employment, and like- 
wise millions of capital, with general 
derangement of industrial system, 
thus increasing the cost of production 
by disturbance of the economies; 
prices in many cases falling below the 
actual cost of production, even at the 
reduced wages ; business men plung- 
ing into bankruptcy on every hand, all 
confidence destroyed, universal "re- 
trenchment" causing still further 
accumulations of goods that cannot be 
sold, and a whole nation of people 
desperately striving to save something 
from the general wreck. 

Here we have a most pitiable spec- 
tacle of men who are indeed as " sheep 
without a shepherd." We are now in 
the midst of what are called "hard 
times." 

Let us turn from consideration of 
the foregoing for a little while and 
take as comprehensive a view as we 
may of the situation during a period 
of so-called hard times. 

It will not be claimed that there is 
any lack of productive power ; in fact, 
most people will aver that the very 
cause of the ditflculty is general over- 
production; which is equivalent to 



saying that there is more than ever 
before of the things needful to human 
comfort : therefore, poverty prevails ! 
There is such an excess of cloth that 
we must do with less clothes till the 
surplus shall have been reduced ! The 
farmer complains that the price of 
wheat has fallen below the cost of 
production ; therefore we must do 
with less bread ! The market is 
glutted with shoes and the price of 
leather has fallen so low that the 
tanneries are closing down to wait for 
a price that will afford a living profit ; 
in short, the world is so rich in the 
item of shoes that we shall have to go 
barefoot for a time ! The laborer, the 
mechanic, the farmer, the manufac- 
turer, the merchant— in fact, every- 
body wishes to sell either labor or the 
products thereof. While selling and 
buying are correlative terms, the one 
being impossible without the other, 
yet everybody avoids purchasing as far 
as possible. Here we have the 
anomaly of a universal endeavor to 
keep from buying, coincident with a 
universal endeavor to sell ! 

In many instances the excessive 
competition has wiped out profits en- 
tirely, and the employer sees no ave- 
nue of escape from ruin except by 
still further reductions in wages. But, 
as we have seen, this can serve only as 
a temporary relief, for when it shall 
have become general, the severity of 
the situation will be but intensified. 

The question may now arise, what 
keeps the industrial fabric from fall- 
ing into total wreck? At first glance 
it would seem that, if reduction of wages 
will cause hard times, and if the latter 
in turn will impel to still further re- 
duction, then the logical sequence 
would be universal financial ruin, and 
a turning back of the race to a state 
approaching that of the savage ! And 
indeed this is exactly what would 
happen if there were no limit to the 
reduction in wages. But employers 
of labor are not generally the inhuman 



10 



Wages, the Mother of Profit. 



wretches that individuals, driven to 
desperation by hardship, have some- 
times called them. As a matter of 
fact, the majority of employers de- 
plore the necessity for reducing wages 
to the point that will cause palpable 
hardship to their workmen, and they 
who would go much beyond tliis are de- 
terred by fear or by force. They fear 
the contempt of the people of their 
own class, and also the vengeance of 
the outraged workmen. Therefore, 
the situation does not get entirely 
beyond control, though there is always 
danger that it will, and as the system 
of division of labor becomes more and 
more perfected this danger increases. 

What a pitiful condition now con- 
fronts us, with a large surplus of idJe 
labor and capital, both eager for em- 
ployment, and wishing to join in pro- 
duction and to share the product, yet 
absolutely powerless to act. What 
shall be done ? If indeed reduction of 
wages caused this deplorable condi- 
tion, then certainly a general increase 
ought to cure it. But the question at 
once arises, ''how can wages be in- 
increased when the wages current con- 
sume the whole price of the product ? " 
It is a fair question and must be satis- 
factorily answered, else the position 
that we have taken will prove unten- 
able. But before entering upon an in- 
vestigation of the question as to 
whether wages can, under these cir- 
cumstances, be advanced, it would be 
well to enquire if a general advance 
would have the desired effect. 

" It is a poor rule that will not work 
both ways." Let us therefore reverse 
the order by which it has been shown 
that the business depression was 
brought about, and see what will be 
the result. 

Our last tabulated statement of the 
industrial situation was as follows: 

Wages per day, per cap $1.50 

Profit per day, per cap .37i 

Price ©f the day's product 1.87i 

Of these wages, the fixed prices 

consume, per day .50 



Of the profit .12i 

Leaving, of the wages, available 
for payment of the variable 

prices, per day 1 .00 

And of the profit .25 

This enabled the wages to pur- 
chase the day's product in 

days 1 .875 

The profit in days 7.50 

Now, omitting for the present all 
consideration of the question how the 
thing may be accomplished, or even as 
to whether it may or may not be 
possible in practice, let us assume a 
restoration of wages, profits and prices 
to the original figures, and we find : 

Wages per day, per cap $2.00 

Profit per day, per cap .50 

Price of product 2.50 

Amount of wages per day con- 
sumed by fixed prices .50 

Amount available for variable 
prices 1.50 

Amount of profit consumed by 
fixed prices per cap., per day,. .121 

Available for payment of vari- 
able prices 37i 

Total 2^ 

Time required for the workman 
to purchase the day's product 

days 1-66 

Time required for the profit per 
cap. available for the purpose. 6.66 
This is, of course, a positive gain in 
the purchasing power of the wage 
workers and of the profit per capita of 
11 + per cent., and to supply this in- 
creased demand for all those products 
consumed by the great mass of people, 
the hitherto idle labor and capital 
must once more be set at work. 

From all of the foregoing we may 
deduce the following rule : 

If at any time, all the labor of the 
country is not fully employed, increase 
wages till demand shall equal the 
possible supply ; and having reached 
this point let them never be reduced 
again, and never permit an increase 
in the tax per capita for the payment 
of the fixed prices, except for addi- 
tional value received. 

From this basis, human society will 
advance with bewildering rapidity to 
a condition of universal affluence that 



Wages, the Mother of Profit. 



11 



will make the mere provision for a 
comfortable living a matter of small 
concern, and that will leave the 
greater energies of the race free to 
work out the grand destiny that is in 
store for humanity ! 

There are laws beyond the power of 
man to defeat, inherent in his very 
nature, that, under free and un- 
tramelled competition, preclude the 
possibility of permanent prosperity to one 
great producing class, while another great 
producing class languishes in adversity. 
Man's nature is such that he would 
bring about such conditions if be 
could, but God's nature is such that 
he will not permit it. 

Civilization, and the science of gov- 
ernment have advanced too far to 
permit of a retrograde movement. 
We know the possibilities of the pow- 
ers of production, and that these in- 
crease with marvelous rapidity, and 
that, therefore, the estate of man 
ought to, and can, nay, and shall im- 
prove commensurately. 

The weakest point in our social 
economy is the universal ignorance of 
the true law of distribution. When 
men generally shall recognize the fact 
that the necessary basis of universal 
prosperity is an ample wage rate, they 
will find means for its establishment. 

It is highly important that we bear 
in mind that by far the greater part 
of the increased affluence that society 
will experience under the new system 
will arise from the fact that all the 
productive forces of society will be 
perfectly free to develop their utmost 
utility; the effective, or cash, demand 
for the total product, will insure high- 
ly remunerative employment for all 
and at all times. Indeed the nominal 
advance in the rate of wages would 
constitute but a small part of the 
actual increase of income to the 
people, for, under the stimulus of 
never-failing demand, the arts of pro- 
duction would develop more rapidly 
than ever before, and the increased 



product under the true law of distri- 
bution would be equitably shared by 
the whole people. 

If we reduce wages just enough to 
destroy the balance of supply and de- 
mand, we shall thereby start the in- 
dustrial world on the downward 
course, and panic does the rest. 
Hitherto, when some great banking 
concern has failed, or other calamity 
of moment has befallen, we have pro- 
ceeded with the utmost dispatch to 
cut the wages of our workmen upon 
the plea that retrenchment was abso- 
lutely necessary in order to the 
weathering of the impending storm; 
and in so doing we have undermined 
the very basis of our prosperity, for, 
while we cut our workmens' wages, 
competition cuts our profits, and the 
recipient of the flxed prices finds that 
his unmolested income will buy large- 
ly more than ever before, and he really 
wonders what should cause the rest of 
the people to complain of conditions 
that he finds so eminently satisfac- 
tory ! 

We have not yet answered the ques- 
tion "How can wages be increased 
when the wages current consume the 
whole price of the product ? " It is 
evident that if wages be increased, 
prices must be advanced also, and in 
order to do this, concerted action is 
the only thing necessary. The powers 
of great combinations of business men 
have beea recently demonstrated^ in 
the great industrial consolidations. 
On various occasions, a single man has 
been able to advance greatly the price 
of wheat, and to sustain its price for a 
considerable period in spite of the 
efforts of unorganized society in oppo- 
sition. If society, acting collectively, 
prompted by enthusiastic belief in the 
justice of the cause, and having a 
widely disseminated and well- 
grounded hope that its success will 
bring at once universal affluence such 
as the world has never yet known, 
shall not be able to follow the course 



t,ifa 



12 



Wages, the Mother of Profit. 



blazed by individuals who have at 
times held the world, as it were, in 
their solitary grasp, then is indeed our 
case a hopeless one ! Granting that 
employers of labor generally believe 
that an ample wage-rate is the neces- 
sary basis of their own prosperity, 
would they not speedily organize for 
the purpose of accomplishing the de- 
sired result? At this moment there 
are organizations of manufacturers in 
the United States that control, abso- 
lutely, the price of the product in 
their lines. Organized effort is the 
order of the present day, and society 
can, and will do the things that it 
thinks to its material interest to do. 



OF THE EFFECT OF HIGHER 

WAGES AND PRICES UPON 

THE RECIPIENTS OF 

THE FIXED PRICES. 

The losses to society from derange- 
ment of industrial system and from 
idleness, are vastly more than from 
any other cause. While it may seem 
like a hardship to the recipients of the 
fixed prices to be thus compelled to 
contribute, as it were, to the general 
prosperity, in that they are obliged to 
pay a higher price for what they buy, 
without receiving any advance in 
their incomes, yet it can be shown 
that in the end it will not prove a 
real hardship ; and, besides, if their 
condition shall prove unsatisfactory, 
as a result of the steps that have 
brought abundant prosperity to all 
other classes, they will be at all times 
at perfect liberty to join the ranks of 
the latter, and so to share fully in the 
general affluence ! 

A philosophic consideration of the 
primary causes that move men to ac- 
tion will reveal the fact that it is not 
simply a desire for greater wealth that 
spurs the well-to-do to struggle with 
might and main to pile up millions 
till the habit becomes a second nature 
and the unhappy millionaire dies 



while still grasping for more ! It is 
not, primarily, a desire for great 
wealth that moves him to act so 
strongly ; but it is the appalling con- 
dition of common humanity under the 
changeful and demoralizing circum- 
stances of business affairs that impels 
him to accumulate wealth sufficient 
to preclude the possibility of his ever 
becoming subject to the necessity of 
offering his labor for sale at the 
market price that himself has helped 
to establish, with the frequent proba- 
bility of its being declined at any 
price I 

The augmented prosperity that fol- 
lows upon the new system is not all, 
nor even very largely, derived as a 
direct contribution from the fixed 
prices. The contribution from the 
fixed prices is as the seed to the 
harvest; as the match to the bonfire. 
The hitherto unemployed labor and 
capital, and that which has been but 
partially employed, together with the 
immeasurably increased economy of all 
productive forces, actually produce the 
greater part of the added wealth. 

To give a very striking, but at the 
same time, quite consistent illustra- 
tion of the case; suppose the income 
of the wage people and employers to 
be, per capita, two dollars a day, and 
that the fixed prices consume one-half 
of it. Now reduce the income to one 
dollar a day without reducing the 
fixed prices and there will be abso- 
lutely nothing left wherewith to pur- 
chase commodities, no matter how 
low the prices of these may fall ; and 
this would present to the world the 
pitiable spectacle of a world of men 
fallen from a condition of independent 
affluence to one of dependence upon 
the charity of the recipients of the 
fixed prices ! 

Such has at times been the condition of 
Ireland, and such must necessarily be 
the condition of any country, no mat- 
ter how rich in natural resources, 
where wages are suffered to decline 



Wages, the Mother of Profit, 



13 



below a certain limit. The infallible 
test as to the rate of wages that will 
conduce to the best interests of all 
society is to mark whether all labor is 
fully employed or not. If not, then 
nothing but a general increase in the 
wage rate will make possible the per- 
manent employment of the idle, and 
it is certain that profits will not have 
reached the highest point till all labor 
shall be employed. 

Crime and pauperism increase great- 
ly the fixed prices, and disturbance 
of system is immensely expeosive. 
Public expense always increases 
greatly in times of business distress, 
when the people are least able to bear 
it. And since public expense belongs 
to the division or category of fixed 
prices, the effect, economically, is the 
same as would be a still further reduc- 
tion of wages and profits, though in this 
case, the recipients of the fixed prices, 
other than the criminal and the pauper 
classes, have to bear a portion of the 
burden. If there is a million of un- 
employed poor in the country the 
affluent have to support them in their 
idleness whether directly or indirectly. 
But this expense is a mere bagatelle 
when compared to the incalculable 
loss resulting from the disturbance of 
the industrial system. It is plain that 
if but one-half of the nation's produc- 
tive force is employed, then the in- 
come of the people is but half what it 
might be. And there have been 
numerous periods in our recent history 
when not more than half of these 
forces were employed. It must be re- 
membered that the number of men 
who are entirely unemployed, the 
stores and factories that are totally 
unoccupied, the mines that lie un- 
.worked, the boats that rot in their 
slips, and the cars that decay upon 
the sidings, constitute but a minor 
part of the unemployed factors of pro- 
duction, for, in times of extreme busi- 
ness depression, many factories that 
still continue to run, curtail the num- 



ber of days in the week, or the num- 
ber of hours in the day, or both; 
stores that are occupied may not be 
utilized to the half of their capacity, 
vessels that had formerly been loaded 
with merchandise both ways, carry 
sand ballast one way and a half cargo 
of goods the other ; railroad cars go, 
loaded, but return empty, while the 
number of depots, sheds, roundhouses, 
etc., and the mileage of track cannot 
be reduced by a dollar's worth. To 
get a more vivid idea of the loss inci- 
dent to this condition, imagine the 
case of a people's building manufac- 
turing structures, store buildings, 
railroad tracks, rolling stock and 
general equipment to the extent of 
one hundred per cent, beyond what is 
needed. This would be of course, a 
doubling of the fixed capital without 
hope or possibility of immediately in- 
creasing the product. And yet the 
actual loss resulting from such a 
course would not be so great as that 
consequent upon cutting down the 
business of the country to one-half its 
capacity. Because, in the former case 
all productive forces are fully em- 
ployed, profits and wages are ample, 
and a large part of the added facili- 
ties will soon be needed and therefore 
fully utilized, while the remainder, 
which is, of course wasted, is simply 
the extravagant expenditure of a 
wealthy people. But, when a nation's 
business is curtailed till but a fraction 
of its labor and capital are employed, 
it is entirely because of diminishing 
profit, while the very nature of the 
situation makes heavier and more 
grevious the common burdens of 
society. In the former case the nation 
is producing much and wasting a por- 
tion of the product, while in the lat- 
ter, we are consuming the accumula- 
tions of the past — diminishing our 
capital by consumption and decay, 
and conducting our business by 
methods of extravagance which, com- 
pared with the economies possible 



Wages, the Mother of Profit. 



under full employment are simply ap- 
palling. 

I wish to call attention to a most 
deplorable feature of the industrial 
situation that might perhaps have 
been more appropriately discussed 
earlier in this treatise. It must be 
obvious to every thinking man that un- 
der existing circumstances, in the total 
lack of organization on the part of em- 
ployers, the wage rate is subject to 
diminution whenever it suits the op- 
portunity of the most selfish class of 
employers. No matter how much in- 
clined the nobler and more generous 
may be to maintain an ample rate of 
wages, they must follow the lead of ' 
the mean and selfish, whenever the 
industrial situation shall be such as to 
make possible the cutting of wages ; 
for, there are always numerous indi- 
viduals whose capacity for unfair prac- 
tices in order to self-aggrandisement 
is so extreme as to make the cutting 
of wages appear by comparison a 
virtue! Conceding then, that, in 
order to the fullest possible employ- 
ment of all the forces of production, 
and the highest degree of general 
prosperity, (under which conditions 
the stress of competition is, of course, 
less tense than it can possibly be 
under any oiher circumstances) it Is 
necessary that an ample wage rate be 
maintained, it would seem the part of 
wisdom for employers generally to or- 
ganize, with that object in view. 

Wages being thus fixed, and the de- 
mand for product being equal to the 
utmost possible supply, competition 
between employers will be, naturally, 
as light as it ever can be, and profits 
will be correspondingly high. Compe- 
tition among employers will from this 
time forth regulate the rate of profit, 
but, as the conditions of life among 
the wages-receiving class will be so 
immeasurably better than ever before, 
the desire to emerge from this class 
and to conquer a place in the employer 
class will be greatly less than now, 



with the consequent result that com- 
petition will never again reach the 
tense degree that has so often marked 
it in the past, and profits will not rise 
and fall so extremely as hitherto, but 
they will be ample and secure. 

An erroneous conception of the law 
of wages is responsible for most of the 
great evils that afflict human society 
today. We have seen that an ample 
wage rate, never, under any circum- 
stances, to be reduced, would cause 
demand to equal the greatest possible 
supply, thus employing all labor, and 
every other productive force ; and we 
know that under such circumstances 
the aggregate product would be 
abundantly sufficient for all. 

But under the conditions that exist 
today, so frightful are the possible 
circumstances of the great mass of 
human beings who must subsist upon 
wages when there is employment, and 
upon charity when there is none, that 
many even welcome war as a vpossible 
beneficent alternative ! And here are 
we, building battle ships with armor 
to resist the heaviest missiles this 
year, and next year our neiglibor 
builds a bigger gun which will defy 
our steel defense. Then we build 
larger ships and protect them with im- 
proved and heavier armor and in turn 
our neighbor enlarges his gun and im- 
proves his missiles ! How much 
further shall folly lead us in this mad 
career? It is easily within the power 
of the nations to divert nearly all this 
incalculable wealth to the betterment 
of the conditions of human life. 

Because of the intolerable hardships 
of the life of the lower classes, men 
fight like savage beasts for pay, and 
women prostitute their bodies for 
gain. A few years ago we conteniT 
plated with horror the spectacle of the 
Spanish bull-fight; but, today, any 
week in the whole round year may be 
seen in any and all large cities of the 
United States more brutal and abhor- 
rent fights between human beings ! 



Wages, the Mother of Profit. 



15 



In the year 1893, at the World's Fair 
at Chicago, the American public for 
the first time witnessed the Oriental 
dance performed by antipodean pros- 
titutes consisting of bodily evolutions 
whose every movement was a sugges- 
tion of lascivious abandonment that 
made men of none too stringent morals 
to blush for shame ! — and today what 
was once the dramatic stage of 
America is become a platform on 
which immodest women, assisted by 
males, as a foil, and to add piquancy 
to the scene, exploit their forms, half 
nude in fact, and wholly so in sugges- 
tion ! 

Let no man denounce these women. 
They are the victims of the industrial 
system, which enriches the few be- 
yond computation,' sustains a numer- 
ous class in a precarious condition of 
affluence fraught with nervous anxiety 
and fear of impending ruin, while the 
great mass of men and women wage 
an unequal fight for a respectable sub- 
sistence and tremblingly see the 
chances for emergence narrowing and 
constantly growing more difficult ! 
Self-preservation is the first law of 
nature ; and let not him who witnesses 
a lewd scene for mere pastime, con- 
demn by so much as a whisper of cen- 
sure, the poor creature who gratifies 
his sensuous apetite in exchange for 
bread ! 

Will anybody argue that the reeking 
sweat shops and the pestilent tene- 
ments of the great cities are inhabited 
by choice, of the haggard swarms of 
beings created in the image of God ? 
but ah ! how marred and wounded by 
their stronger brothers and sisters ! 
Thus far, the good and pure among 
men have tried a little here and there 
in a laudable endeavor to ameliorate 
conditions they knew not how to cure ; 
have snatched a trainload of tired 
mothers and sickly children from 
their hopeless dens and given them a 
few days' fresh air once in the weary 
round of months, only to be again and 



speedily returned to their habitations 
of woe ! We build homes for the 
fallen women, and still we stand 
aghast at th'e increasing number 
whose only homes are dens of infamy 
and lust ! Good men and women find 
a poor fellow who is out of employ- 
ment, but who is willing to work, and 
they rest not until they have found 
him a place where, for a little while, 
at least, he can get enough wages to 
buy his bread ! But, alas, how inade- 
quate are the well-meant efforts of a 
fraction of society to counteract the 
evil effects of a false basis of social 
conduct. A single man, infected with 
the plague, can pass through a city 
and lay its people low, while all the 
physicians of the world cannot raise 
them up again ! 

In the light of the deductions set 
forth in the former part of this essay, 
the remedy for the evils of poverty is at 
hand. Establish a universal (which is 
not to say nniform) rate of wages which 
will insure a constant demand for the 
products of industry equal to the 
possible supply, and every man will be 
thus at all times sure of highly re- 
munerative employment to the full 
extent of his wish. The question will 
not be then — "can I sell the products 
of my labor ? " but, " what line of work 
shall I follow, that life may be most 
agreeable to me ? " Then, the artist 
may follow the bent of his mind, and 
the musician likewise. Then our 
young men will not be obliged to 
accept anything that may first offer a 
means of subsistence, but each may 
take up the vocation which at least 
approximately fits his talents or his 
tastes. Then, fathers and mothers 
will no longer set their children to 
work in dingy factories, but they will 
be sent to school to learn the new 
science of political economy and how 
to become good citizens ; how to pro- 
tect all society for the future from the 
horrors that result from greed and 
ignorance ; and when the time of 



16 



Wages, the Mother of Profit, 



vacation comes, the children — not 
merely your children and mine, but 
everybody's children — will romp and 
play in the parks of our cities, in the 
pastures where cows stand in the 
water-brooks ; where yellow butterflies 
"glance across the sunbeam's way;" 
where meadow larks sing, and health 
and happiness ride upon the air. 

The vastly increased productiveness 
of system, and of highly economized 
labor will naturally, and rightly lead 
to reduction of the hours of labor, 
both for the wage worker and his em- 



ployer, and the tense strain of busi- 
ness life will be relieved, for, the 
greatest evil of the competitive system 
will have been removed, namely — the 
power of inordinately selflsh men to 
reduce wages, and so, to undersell 
their more humane competitors, thus 
compelling the latter in self-defense 
to do likewise, while every step in the 
downward course of wages, thus in- 
stituted invariably by the bad among 
employers, increases the hardships 
of all. 



ADDENDUM. 

I have grounded the foregoing argument upon the indisputable difference, 
economically, between the two classes of prices, which are here termed the 
fixed and the variable prices. Still, if this economic difference in prices did not 
exist, a general reduction in wages would produce the same disastrous effect 
upon industry during the transition to the.lower level of prices. However, in 
this case it is possible, theoretically, to restore the balance between supply and 
demand without reverting to the original wage rate. The movement never- 
theless, exhausts the accumulations of the past, and lands us upon the same 
level of opportunity that we occupied at the outset. Under no circumstances 
therefore can a decline in the general wage rate be justified. 

My last word shall be a heartfelt testimony to the goodness of our Father 
for that He has provided by unalterable law for the welfare of all, unto the 
very least of His children. 



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